Next, back to basics. Remember that houses are homes, not abstract transactions that can be made profitable with unreasonable levels of leverage/borrowing. I am not advocating a return to the horse-and-buggy days of lending. There is still a role for more conservative securitization, in which packages of home mortgages are sold to the restructured Fannie Mae and Freddie Mac, and a well-regulated private market. However, preserving the connection between originator and borrower is more likely to reduce fraud and consumer abuse.
This will require political and economic leadership to encourage Americans to return to the tough, unpleasant discipline of saving. At the heart of the current meltdown is a stark reality: America is the world’s biggest debtor in both the public sector (budget deficits) and the private sector (financial institutions and corporations). The U.S. financial system is now at the mercy of foreign sovereigns and institutions sitting on enormous piles of cash, much of it from the sale of oil and other products to us.
Back To Basics: Restoring the Human Connection in Mortgage Lending, Emma Coleman Jordan
It sounds like standard vulgar Marxist criticism, but this sort of faux economic talk does no one any good at all. It’s not just the awful sentimentality of the ‘it’s a home, not just a house’ variety, although that is bad enough. It’s the pig-headed insistence that the solution to our economic problems, and by implication the origins, lie in individual discipline, or the lack there-of.
It seems only logical to assume that the savings rate must be related to several structural factors, all beyond the control of any individual. Wages, to start, have not exactly been climbing in the last thirty years or so. The ‘Second Gilded Age” initiated by Reagan’s “Morning in America” promoted hyper-consumption as the highest value. Then you have those pesky medical bills.
What we need is strengthened organized labor and higher wages, national health care, and a vigilante government regulation system. The entire point of the current system is to insulate capital from its own excesses by neutralizing the checks and balances in a democracy. It’s capital, not labor, that needs the ‘tough discipline’ of markets designed to meet human need.